Obamacare tax credit suit rejected

A District of Columbia federal judge rejected a lawsuit Wednesday that challenged tax credits for Obamacare coverage in the 36 states with federal-run exchanges – one of the most significant remaining legal fights over President Barack Obama’s health care law.

The four individuals who brought the lawsuit, Halbig v. Sebelius, had argued that the IRS overstepped its legal authority by allowing federal-run exchanges to provide tax credits for people who purchase health insurance. They contended that the Affordable Care Act only allows for state-run exchanges to access such credits and that Congress purposefully designed the law that way to incentivize states to run their own insurance marketplaces.

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Had the court accepted their argument, the ACA could have been dealt a major blow. With just 14 states and D.C. running their own exchanges, the result could have blocked most of the country from getting federal help to purchase insurance on the new exchanges.

U.S. District Judge Paul Friedman, a Clinton nominee, said an entire reading of the law and congressional intent make clear that the lawprovides premium tax credits through all exchanges, regardless of who’s running them.

“The Court finds that the plain text of the statute, the statutory structure, and the statutory purpose make clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges,” Friedman wrote in his decision.

An attorney coordinating the Halbig suit said his clients, who live in states with federal-run exchanges, will appeal the decision.

“In upholding this IRS regulation that is contrary to the law enacted by Congress, this decision guts the choice made by a majority of the states to stay out of the exchange program,” Competitive Enterprise Institute general counsel Sam Kazman said in a statement. “It imposes Obamacare penalties on employers and on many individuals in those states, penalties that Congress never authorized.”

Obamacare advocates said they expected a ruling in their favor but were still relieved. Families USA Executive Director Ron Pollack called the challenge to the IRS rule the “greatest existential legal threat” to the health care law’s survival.

“Now that the last-ditch legal claim by Affordable Care Act opponents has failed, millions of moderate-income Americans in every state will be eligible for robust financial assistance when they buy a private health plan of their choice,” Pollack said in a statement.

Tom Miller of the American Enterprise Institute said the Indiana case, brought by more than three dozen school districts, may provide the best chance to overturn the IRS rule. However, ACA opponents could see their hopes diminish if the legal fights drag on, he said.

“It’s always hard to take down a law after it’s been in place for a while and has actually been carried out,” Miller said. “It doesn’t mean it doesn’t happen, but it does add a secondary barrier.”